Counterparty Credit Risk in a Multivariate Structural Model with Jumps
39 Pages Posted: 9 Feb 2013 Last revised: 11 Oct 2014
Date Written: September 2014
We present a multivariate version of a structural default model with jumps and use it in order to quantify the bilateral credit value adjustment and the bilateral debt value adjustment for equity contracts, such as forwards, in a Merton-type default setting. In particular, we explore the impact of changing correlation between names on these adjustments and study the effect of wrong-way and right-way risk.
Keywords: Counterparty Risk, Credit Value Adjustment, Debt Value Adjustment, Levy Processes, Normal Inverse Gaussian, Wrong Way Risk
JEL Classification: C15, C63, C65, G13
Suggested Citation: Suggested Citation